Two bidders compete in a sealed-bid auction for a single indivisible object. For each bidder i, the valuation of the object is uniformly distributed on [0, 1]. The valuations of the two bidders are independent. Each bidder knows her own valuation, but not the valuation of the other bidder. The bidders simultaneously submit bids b c [0, ∞), and whoever submits the higher bid wins the object and pays bidder 1's bid. In case of a tie, each bidder wins the object with probability 1/2 and again the winner pays bidder 1's bid. Find a Nash equilibrium of this game in which neither bidder plays a weakly dominated strategy.

Two bidders compete in a sealed-bid auction for a single indivisible object. For each bidder i, the valuation of the object is uniformly distributed on [0, 1]. The valuations of the two bidders are independent. Each bidder knows her own valuation, but not the valuation of the other bidder. The bidders simultaneously submit bids b c [0, ∞), and whoever submits the higher bid wins the object and pays bidder 1's bid. In case of a tie, each bidder wins the object with probability 1/2 and again the winner pays bidder 1's bid. Find a Nash equilibrium of this game in which neither bidder plays a weakly dominated strategy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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